BARODA INDUSTRIES PVT. LTD., MUMBAI V. ITO , CIRCLE 3 (1)(2), MUMBAI

ITA 7275/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2799 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 19-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHAMMED RIZWAN
• Assessee Lawyers: M A GOHEL
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC MUMBAI BEFORE SHRI R.C. SHARMA (ACCOUNTANT MEMBER) AND SHRI PAWAN SINGH (JUDICIAL MEMBER) ITA NO. 7275/MUM/2018 ASSESSMENT YEAR: 2008-09 M/S BARODA INDUSTRIES LTD., 2 ND FLOOR, BAJAJ BHAVAN 226, JAMNALAL BAJAJ MARG, MUMBAI- 400021. VS. THE INCOME TAX OFFICER CIRCLE- 3(1)(2), AAYAKARBHAVAN, M.K. ROAD, 6 TH FLOOR, MUMBAI-400020. PAN NO. AAACB2428A APPELLANT RESPOND ENT ASSESSEE BY : MR. M. A. GOHEL, AR REVENUE BY : MR. MOHAMMED RIZWAN, DR DATE OF HEARING : 04/03/2020 DATE OF PRONOUNCEMENT: 04/03/2020 ORDER PER PAWAN SINGH, JUDICIAL MEMBER; THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. CIT(A)-8, MUMBAI DATED 17.09.2018 FOR ASSESSMENT YEAR 2008-09 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) [CIT(A)] ERRED IN CONFIRMING THE DISALLOWANCE OF RS.8,53,822/- MADE BY THE LEARNED ASSESSING OFFI CER BY INVOKING PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D AS AGAINST A SUM OF RS.3,15,118/- WORKED OUT BY THE APPELLANT IN THIS BEHALF. M/S BARODA INDUSTRIES ITA NO. 7275/MUM/2018 2 1.2 IT IS SUBMITTED THAT THE DISALLOWANCE UNDER SEC TION 14A OF THE ACT COMPUTED BY THE LEARNED ASSESSING OFFICER AND CONFIRMED BY T HE CIT(A) IS EXCESSIVE/ UNREASONABLE AND UNWARRANTED. 2. BRIEF FACTS OF THE CASE ARE THAT INITIALLY THE A SSESSMENT FOR AY 2008-09 COMPLETED UNDER SECTION 143(3) ON 30.11.2010. THE A SSESSING OFFICER WHILE PASSING ASSESSMENT ORDER NOTED THAT THE ASSESSEE HA S SHOWN DIVIDEND INCOME OF RS.3,26,17,910/- RECEIVED ON ACCOUNT OF DIVIDEND , RS.56,01,342/- RECEIVED ON MUTUAL FUND. THE ASSESSEE HAS MADE SUO MOTO DISA LLOWANCE OF RS.50,000/- AS ESTIMATED EXPENDITURE FOR EARNING EXEMPT INCOME. THE ASSESSING OFFICER INVOKED THE PROVISION OF RULE 8D AND MADE DISALLOWA NCE OF RS.8,53,822/-. 3. ON APPEAL BEFORE CIT(A) WAS AFFIRMED. HOWEVER, O N APPEAL BEFORE TRIBUNAL, THE MATTER WAS RESTORED BACK TO THE FILE BY ASSESSING OFFICER FOR PASSING THE ORDER AFRESH. IN SETTING ASIDE PROCEEDI NGS, THE ASSESSING OFFICER MADE DISALLOWANCE OF RS.5,38,704/- UNDER SECTION14A . ON FURTHER APPEAL BEFORE LD CIT(A), THE ACTION OF ASSESSING OFFICER W AS AFFIRMED. THUS FURTHER AGGRIEVED THE ASSESSEE HAS FILED PRESENT APPEAL BEF ORE THE TRIBUNAL. 4. WE HAVE HEARD THE SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. THE LD. AR OF THE ASSESSEE SUBMITS THAT IN ASSESSEES O WN CASE FOR AYS 2004-05, 2005-06 AND 2007-08, REASONABLE DISALLOWANCE AND WA S MADE AND THE MAY BE ALLOWED IN THE YEAR UNDER CONSIDERATION. IN THE ALTERNATIVE SUBMISSION THE LD. AR OF THE ASSESSEE SUBMITS THAT AS PER THE DECI SION OF SPECIAL BENCH OF THE TRIBUNAL IN ACIT V. VIREET INVESTMENT (P.) LTD. 82 TAXMANN.COM 415 (DELHI) (SB) ONLY THOSE INVESTMENTS ARE TO BE CONSIDERED FO R COMPUTING THE AVERAGE VALUE OF INVESTMENT WHICH YIELDED EXEMPT INCOME. THE LD. AR SUBMITS THAT M/S BARODA INDUSTRIES ITA NO. 7275/MUM/2018 3 THE SHORT CONTROVERSY IN THESE CASES THAT ASSESSING OFFICER MADE DISALLOWANCE OF RS.5,38,704/-. HOWEVER, THE DISALLOWANCE IN ACCO RDANCE WITH THE DECISION OF VIREET INVESTMENT (P.) LTD. (SUPRA) WORKED OUT B Y ASSESSEE COMES TO RS.4,40,025/- AND THE SAME MAY BE ACCEPTED. 5. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SU PPORTED THE ORDER OF LOWER AUTHORITIES. THE LD. DR SUBMITS THAT FOR THE YEAR UNDER CONSIDERATION I.E. AY 2008-09 PROVISION OF RULE 8D ARE APPLICABLE . THEREFORE, THE ASSESSEE CANNOT TAKE PLEA THAT IN AYS 2004-05, 2005-06 AND 2 007-08 REASONABLE DISALLOWANCE WAS APPROVED BY THE TRIBUNAL. ON THE A LTERNATIVE SUBMISSION OF THE ASSESSEE THAT ONLY THOSE INVESTMENTS WHICH YIEL DED THE EXEMPT INCOME CAN BE CONSIDERED FOR MAKING OR COMPUTING AVERAGE VALUE OF INVESTMENT SHOULD BE CONSIDERED. THE LD. DR SUBMITS MATTER BE SENT BACK TO THE AO WITH THE DIRECTION TO MAKE THE AFRESH COMPUTATION ACCORD INGLY BY FOLLOWING THE ORDER OF SPECIAL BENCH IN VIREET INVESTMENT (P.) LT D (SUPRA) . 6. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PA RTIES. IN VIEW THE SHORT QUESTION FOR ADJUDICATION IS THE QUANTUM OF DISALLOWANCE UNDER SECTION 14A R.W.R. 8D. THE LD. AR SUBMITS THAT IN AYS 2004- 05, 2005-06 AND 2007-08 REASONABLE DISALLOWANCE FOR APPROVED BY THE TRIBUNA L. THIS PLEA OF ASSESSEE IS NOT ACCEPTABLE TO US. AS RULE 8D IS APPLICABLE FOR YEAR UNDER CONSIDERATION. THEREFORE, THIS ARGUMENT/PLEA OF ASSESSEE IS REJECT ED. HOWEVER, WE ACCEPT THE ALTERNATIVE PLEA OF THE ASSESSEE THAT ONLY THOSE IN VESTMENTS WHICH YIELDED EXEMPT INCOME ARE TO BE CONSIDERED FOR COMPUTING AV ERAGE VALUE OF INVESTMENT. THEREFORE, WE DIRECT THE ASSESSING OFFI CER TO FOLLOW THE DECISION OF SPECIAL BENCH OF TRIBUNAL IN VIREET INVESTMENT (P.) LTD. (SUPRA) AND CONSIDER ONLY THOSE INVESTMENT FOR COMPUTING THE AVERAGE VAL UE OF INVESTMENT YIELDED M/S BARODA INDUSTRIES ITA NO. 7275/MUM/2018 4 THE EXEMPT INCOME DURING THE YEAR AND MADE THE FRE SH COMPUTATION OF DISALLOWANCE UNDER SECTION 14A. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH MARCH 2020. SD/- SD/- (R.C. SHARMA) (PAW AN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED: RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (ASSISTANT REGISTRAR) ITAT, MUMBAI